Engberg Company installs lawn sod in home yards. The companys most recent monthly contribution format income statement follows:

	Amount	Percent of Sales
Sales	$ 88,000	100%
Variable expenses	35,200	40%
Contribution margin	52,800	60%
Fixed expenses	39,600
Net operating income	$ 13,200

Required:

1. What is the companys degree of operating leverage?

2. Using the degree of operating leverage, estimate the impact on net operating income of a 7% increase in unit sales.

3. Construct a new contribution format income statement for the company assuming a 7% increase in unit sales.